A123 as a whole, or in pieces, is going to be sold to the court-approved buyer(s). That is likely to be either Johnson Controls, which is the lead bidder for the company’s automotive business, or Wanxiang Group, which wants to buy the whole company. A123 had an agreement to transfer up to 80 percent of the company’s ownership to the China-based automotive parts manufacturer over the summer, but its bankruptcy filing on Oct. 16 – with Johnson Controls as the new automotive assets purchaser – nullified its agreement with Wanxiang.

But before that, one of the conditions of the Chinese deal was that all of A123’s government grants and tax credits remain intact after transfer of ownership. Presumably that part of the equation makes the company – otherwise a total failure – an attractive acquisition.

In his letter to Sens. Grassley and Thune, A123 General Counsel Eric Pyenson acknowledged as much in response to the senators’ question about whether A123 still “needed” taxpayer funding with the pending influx of millions of dollars from Wanxiang (before the bankruptcy filing). Pyenson told the senators that A123’s grant was not awarded based upon the company’s financial needs, but instead to stimulate job creation in the alternative energy sector.

“If A123 (or a potential successor-in-interest to the Grant) needs to expand and/or update its current U.S. manufacturing capacity beyond current capacity,” Pyenson wrote, “then it is possible that it may desire to take advantage of some or all of the remaining Grant funds to do so.”

In other words, A123’s grant is transferable to whoever purchases its assets regardless of nationality, financial condition, or public perception – at least in the view of its top lawyer. Not only that, but the purchaser will have until the end of 2014 to spend down the grant, after the Department of Energy agreed to extend its terms by two years. A123 was originally required to use the money (and thus “stimulate” the alternative energy economy) by the end of this year. This grace was extended at about the same time DOE cut off the $529 million stimulus loan of A123’s top customer, Fisker Automotive, allegedly due to its inability to meet certain milestones, which at a minimum illustrates DOE’s inconsistency in grant management policies.

Another condition that Wanxiang required was for A123 to maintain its listing on the NASDAQ exchange, which was nullified with the bankruptcy. Wanxiang had originally offered up to $450 million for 80-percent control of A123, and has not shown diminished interest post-bankruptcy. Considering its value is likely far less after the filing than the perennial loser was already, it’s possible the Chinese hope to get their hands on A123 for extremely cheap.

Grassley and Thune were concerned that if a sale to Wanxiang went through, it would mean a U.S. taxpayer-funded technology transfer (and endangerment of Defense Department secrets) to the Chinese. On this issue Pyenson was dismissive.

“It should be noted that the Grant was not intended to support A123’s research and development efforts,” Pyenson wrote, “and, as a result, A123 has not developed any intellectual property as a result of receiving Grant funding.”

In other words, A123’s view is that American taxpayers and their representatives have no other interest in what the company does besides the fact that they have created an unidentified number of jobs at two refurbished plants in Michigan. If those plants remain open under control of new ownership, then Pyenson is saying that’s all the senators should concern themselves with.

Besides, as Pyenson pointed out to the senators, A123’s business is already entangled with China (and India too). The company has a partnership with SAIC Motor Corporation, and in March expanded its plans to build “a jointly developed battery manufacturing facility” with China’s largest automaker. Pyenson also told Grassley and Thune that A123 owns a cathode powder manufacturing facility in China, which it intended to sell to Johnson Controls for $9 million before the bidding was opened up to other companies.

Regarding specific sensitive information, Pyenson informed the senators that A123 has one government contract classified as “secret.” He said if acquired by a foreign company, A123 “would continue to comply with applicable industrial security and export control regulations.” He added that conditions placed upon such a deal by the Committee on Foreign Investment in the U.S., which would have to approve sale of the company to a foreign interest, would likely put additional constraints (such as spinning off that part of the company) on the handling of classified aspects of its business.

The explanations are not likely to comfort Grassley, Thune, or anybody who cares about the (mis)use of taxpayer money. A123’s life, and whatever value its technology has, was extended thanks in part to “investments” from the taxpayer. Clearly whatever worth A123 has left – including those assets in Michigan – are somewhat attributable to government funding.

Meanwhile it appears stimulus funds continue to flow to other companies that have declared bankruptcy, like battery maker Ener1. And Recovery Act money that went to Fisker was for a vehicle that was manufactured in Finland. Taxpayer money is going to back other companies, like Ford and Nissan, whose electric cars hardly even sell.

I guess there’s only one word for this kind of waste and failure: re-election.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.